FHFA Estimates Fannie, Freddie’s Ultimate Cost

The Federal Housing Finance Agency said on Thursday that the two GSEs might need as much as a combined $363 billion from the federal government through 2013, while the Conference Board Leading Economic Index for the United States increased 0.3 percent in September to 110.4, and chief administrative officer Robert Rizzo or two other top officials of Bell, Calif., have been charged with misappropriating of $180,000 of affordable housing money.

The Federal Housing Finance Agency, currently the conservator of Fannie Mae and Freddie Mac, said on Thursday that the two GSEs might need as much as a combined $363 billion from the federal government through 2013. That was the headline number but also the worst-case scenario, in the event of an even worse housing market than now.

Since the GSEs are paying dividends to the government, the net loss under the worst-case scenario above would be $259 billion. More optimistic assumptions about the future of the housing market would put the government’s net loss at $154 billion, while the most optimistic FHFA scenario puts the loss at $142 billion.

Those are hardly the only estimates out there. The Congressional Budget Office said last year that the GSEs would need a total of $389 billion all the way through 2019, while the White House Office of Management and Budget claimed earlier this year that Fannie and Freddie might need only $160 billion all together, provided the housing market starts to show a little pep. But even that $160 billion figure counts as serious money: it’s roughly the GDP of Pakistan, Chile, Romania or the Philippines (2009 figures from the IMF).

Conference Board Leading Indicators Tepid

The Conference Board Leading Economic Index for the United States increased 0.3 percent in September to 110.4, following a 0.1 percent increase in August and a 0.2 percent increase in July, the organization said on Thursday. The index’s components include average weekly hours in manufacturing, average weekly initial claims for unemployment insurance, building permits, stock prices and more, with 2004 = 100.

“The LEI remains on a general upward trend, but it is growing at its slowest pace since the middle of 2009,” noted Ataman Ozyildirim, an economist at the Conference Board, in a statement on Thursday. Still, “there isn’t any indication of a relapse into another downturn through the end of the year.”

The exceedingly sluggish Conference Board Coincident Economic Index was unchanged in September, remaining at 101.4, following no change in August and a scant 0.1 percent increase in July. The Conference Board Lagging Economic Index increased 0.4 percent in September to 108.4, following a 0.1 percent increase in August and a 0.4 percent increase in July.

Affordable Housing Money Goes Astray

What to do with affordable housing money if you’re a small town in California, a state that probably needs such housing more than any other? According to a state audit released this week, if you’re chief administrative officer Robert Rizzo or two other top officials of Bell, Calif., you use the money–$180,000 or so–on cellphones, car batteries, car washes and landscaping for yourself.

According to the charges pending against Rizzo and the others, that was just the tip of the misappropriation iceberg. Some $5.5 million in city funds seems to have been misappropriated, including $500,000 in redevelopment agency funds that instead went to pay the salaries of Rizzo and others, and for their vacations.

Wall Street had a middling positive day on Thursday, with the Dow Jones Industrial Average up 38.6 points, or 0.35 percent. The S&P 500 gained 0.18 percent and the Nasdaq eked out a 0.09 percent gain.